How is day trading taxed in Singapore?

What is day trading?

Day trading is a form of active trading that involves opening and closing a position within 24 hours in an attempt to take advantage of small price movements within the market. Generally speaking, day traders take multiple positions throughout the day, often on different asset classes.

With us, you have the choice to day trade via CFDs, on shares, indices, commodities, crypto and forex.

To gain greater exposure to the markets, it’s common to trade on leverage. This means you open a position much larger than your initial margin, at a fraction of the value of the underlying asset.

While trading on leverage creates trading opportunities, it comes with an increased risk as profits and losses are magnified meaning you could lose more than your initial deposit. It’s therefore important to have a risk management strategy in place before you begin day trading.

How is day trading taxed in Singapore?

How day trading is taxed depends on the instrument you choose to trade with. One of the most accessible ways to day trade is via contracts for difference (CFDs.)

As you don’t take ownership of the underlying asset, you’re not required to pay stamp duty when trading via CFDs.

It's important to remember however, that tax laws are subject to change and differ depending on personal circumstances and the country you are trading from.¹

Please note that we don’t offer any tax advice to our clients. If this is a service that you’d like, we recommend consulting with a tax advisor to discuss your personal circumstances.

Day trading tax example: buying DBS Group Holdings shares

Here’s an example of how you could be taxed for day trading in Singapore. This is based on the assumption that you want to buy (go long) 5000 DBS Group Holdings shares.

Because you believe DBS Group Holdings shares will rise over the course of the trading day, you buy 5,000 CFD contracts in the hope of selling them at a higher price later in the day. If the share price does rise, you’ve made a profit, but if they fall, you’ve made a loss.

Please note this table is simply to demonstrate a possible outcome and may not be applicable to everyone. Your individual circumstances may mean the amount of tax you’re required to pay is different and it’s worth contacting a tax advisor to confirm this.

Other things to know about day trading

1. Go long or short – when trading CFDs, you can take a position on rising and falling markets by going either long (buy) or short (sell). If judged correctly, this provides the opportunity to profit from both rising and falling prices, but if the market moves against you, you’ll make a loss
2. Choose a day trading strategy – there are many different ways to day trade. These include scalping, mean reversion, money flows, trend trading and swing trading. Each method comes with its own pros and cons so it’s worth looking into each of them before you begin day trading to see which one best suits your needs
3. Take your capital further with leverage – gain greater exposure to the markets by opening a position much larger than your initial deposit. Please note trading with leverage comes with an increased risk so you could gain or lose money faster than expected and your losses could be more than your initial outlay
4. Manage your risk – to minimise your losses, it’s important to have an effective risk management strategy in place. Tools such as knock outs and limit orders can be highly effective in doing this

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